"Overly optimistic financial markets": IMF deputy chief warns of inflation risks

The deputy head of the International Monetary Fund, Gopinath, warns of major inflation risks. It does not share the optimism of many financial markets around the world.

Washington - The International Monetary Fund (IMF) warns of major inflation risks in emerging markets. "Despite encouraging signs, I am concerned that price pressures appear to have entrenched in many economies and that the upside risks to inflation are significant," IMF Deputy Managing Director Gita Gopinath said on Wednesday in a speech manuscript at a conference hosted by Brazil's central bank.

Central banks would therefore have to remain resolute and continue their tight monetary policy. Otherwise, "even more painful measures will be needed." This is a lesson learned from the period of high inflation in the 1970s and is still true today, Gopinath said.

"Overly optimistic" financial markets

It is less optimistic than the financial markets about lowering inflation in emerging markets. The markets are "too optimistic" here. Inflation is unexpectedly high and persistent, and it often rises faster than expected, the IMF expert said. The pent-up demand during the Corona pandemic contributes to this, but so does the shift in demand from goods to services and a decline in production and employment potential. (REUTERS, lf)